How to Settle with Credit Cards Companies Due to Hardship

The U.S. credit card debt amount, reported by Nilson Reports (April 2009) is a staggering $972.73 billion. In the Javelin Strategy & Research, "Credit Card Issuer Profitability in a Difficult Economy," July 2008 issue, 28 percent of those surveyed reported difficulty in making credit card payments. Negotiating a settlement with the creditor when faced with difficulty can be the best option.

Lump Sum

Creditors will most likely agree to a more drastic reduction in debt if you offer a lump sum amount in lieu of monthly payments. The Wall Street Journal reports that in tough economic times, a credit card company is more likely to forgive up to 70 percent of the owed amount. The company can agree to these amounts because they would rather receive something rather than charging off your entire debt amount due to nonpayment.

Lower Interest Rate

As of December 2009, Index Credit Cards reports that the average consumer credit card interest rate is 16.35 percent. Call the credit card company and negotiate a lower interest payment for the duration of the loan, or at least for as long as you expect your hardship to last. Incidentally, the same report shows that reward cards (i.e., airline, points, store rewards) have the highest interest rate of 17.09 percent. Negotiating the interest rate can reduce your monthly payment drastically.

Decreasing Minimum Payment

With the current economic conditions in 2009, Capital One bank reported in March that the charge-off rate had reached an all-time high of nearly 10 percent. Due to these conditions, many of the larger banks like Citibank, Bank of America, Chase, and Capital One have implemented hardship programs, enabling consumers to make a small payment equal to 1.75 percent of their existing balance to repay their debt.

Deferred Payments

If your situation is temporary (i.e., job loss, medical bills), the credit card company may be able to defer payments for a predetermined amount of time. In most cases, deferred payments will be an option that your credit card issuer will offer; deferred payments is usually not granted if requested by the consumer.

Hardship Letter

To begin the process of negotiating the debt, you will need to write a hardship letter describing your situation. Mail to to the company address (not billing address intended for payments only), and send it via registered mail to track correspondence. Usually, the mention of bankruptcy consideration will yield more cooperation from the credit card companies.